Construction spending

The Construction Spending report is a monthly report issued by the US Census Bureau unit of the Department of Commerce. This report is the result of a survey which measures the change in the monetary amount that builders have spent on construction projects for the month under review.

The survey covers construction work done every month on both new structures and existing structures, be it private projects or government funded projects. The data includes the amount spent on labor, construction materials, architectural rendering, engineering works, all overhead costs, any fees or taxes incurred by the construction project as well as the profit paid to the contractor handling the project.

The period in review for which data is collected starts from Day 1 of the month under review and lasts for about three weeks. The data reported shows the activity that took place during the previous calendar month. Therefore the Construction Spending report released on February 3rd, 2014 covered the period from January 1, 2014 to January 22, 2014. The survey has been conducted monthly since 1964.

Time of Release

The Construction Spending report usually comes out in the first week of the new month, 30 days after the previous report. The time of release is 11am US Eastern Time. The data is released on this webpage of the US Census Bureau and also on independent news feeds from Bloomberg and Thomas Reuters.

Interpreting the Data

This report has a low market impact and is therefore not directly tradable. However, it can be used as a predictor of the highly important housing data such as housing stats, New Home Sales and Existing Home Sales. It is very normal for an existing structure to be renovated before it is leased to new occupants. It therefore follows that if there is more spending on the putting up of new houses or renovation on existing ones, it is a sign that there is a boom in the housing market and therefore a high reading should be interpreted as USD +ve.

Lack of spending on construction projects or cutbacks in spending on construction is a sign of a housing market in decline, and this will manifest as a low reading which is USD negative. Considering the damaging effect the collapse of the US housing market had on the global economy, any statistics on housing (tradable or not) must be watched very carefully. Even though construction spending has low market impact, the figures may indicate a very interesting scenario for those trading other high impact housing data.

Conclusion

Another dimension this report brings is that by differentiating between public spending on construction and private spending on construction, investors are able to see trends in spending on construction projects from both sectors of the economy.

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